DoorDash founder Tony Xu: "You can't compete against an incumbent on their territory”

Tony argues:

“You have to find something where they're not incentivized to do it (Innovator's dilemma)… and you have to find an area where you think you can be advantaged.”

For DoorDash, this was end-to-end delivery and focusing on suburbs rather than cities. The incumbents at the time didn’t want to touch end-to-end delivery because it was lower margin. Incumbents also focused on cities because of the network density, but DoorDash realized the market outside of city centers was actually the bigger opportunity because that’s where most people lived.

“Knowing where the market is and knowing structurally why that's different and why that might be difficult for a competitor to serve, that's pretty important. Now, you also have to be correct on that bet… [Our bet on serving suburbs] turned out to be correct. But we didn't know that a priori.”

Tony’s other piece of advice is that you have to be “super fast”. A key advantage versus incumbents is that they have to make capital allocation decisions across their many businesses. But you probably only have one product so you should be able to move much faster:

“Focus is actually really easy… You’ve got to build that one product”

Full video: Khosla Ventures “Hard Fought Success | Tony Xu & Keith Rabois“ (Aug 2024)